German Economic Confidence Boosted: ZEW Index Soars
"The atmosphere remains cheerful and upbeat"
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Germany's financial experts are flashing a brighter smile on their faces as the German economy looks more promising than ever. Low-interest rates, robust government spending, and a hopeful resolution to the trade dispute have fuelled an upswing in the mood of investors and analysts.
"The morale is looking up even more," remarked ZEW President Achim Wambach. "This is due to the recent surge in investments and consumer demand," he added. The optimism around the planned fiscal policy measures of the new government presents further positive prospects for the economy, Wambach added.
Soaring high, the Mannheim ZEW's economic expectation index clocked a 22.3-point increase to 47.5 points in June, as reported by the Mannheim Center for European Economic Research (ZEW) in its survey of 200 professionals. Economists expected a more moderate improvement of 35.0 points.
Andreas Scheuerle, an economist at DekaBank, observed that the trade conflict with the US has been weathered, and hope for a peaceful resolution in the trade dispute has grown considerably. However, an unexpected economic risk looms in the form of the Israel-Iran conflict, impacting the survey's results, according to Alexander Krüger, the chief economist of Hauck Aufhäuser Lampe Privatbank. "Any escalation in the Israel-Iran conflict beyond the regional level would significantly impact the mood and survey results," Krüger noted.
Furthermore, assessments of the current economic situation improved, though it's still the poorest among all European countries. Economic developments in the Eurozone also showed continued improvement.
A Promising Outlook for 2025 and 2026?
Research institutes have recently boosted their economic forecasts for 2025 and 2026, attributing their optimism to the strong start of the year and the tailwind from the new government's financial policies. The Munich Ifo Institute, the Essen RWI, and the Kiel Institute for the World Economy (IfW) expect a 0.3% increase in gross domestic product (GDP) in 2025 – with the Halle IWH anticipating an even higher 0.4% growth. In 2026, a growth of around 1.5% is projected.
[1] ZEW Index[2] German Economic Sentiment[3] Economic Indicators[4] Fiscal Policy Measures of the New Government[5] OECD Economic Forecasts[6] Global Uncertainties and Risks
In light of the positive economic indicators, such as the ZEW Economic Sentiment Index and the new government's fiscal policy measures, there is an expectation for community and employment policy to become more supportive and favorable for businesses, potentially leading to an increase in finance and employment. However, global uncertainties and risks, like the ongoing Israel-Iran conflict, may potentially impact the economic forecasts for 2025 and 2026.
